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Glossary

  • Page ID
    54102
  • Example and Directions
    Words (or words that have the same definition) The definition is case sensitive (Optional) Image to display with the definition [Not displayed in Glossary, only in pop-up on pages] (Optional) Caption for Image (Optional) External or Internal Link (Optional) Source for Definition
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    Glossary Entries

    Word(s)

    Definition

    Image Caption Link Source
    adverse selection The fact that the least desirable borrowers and those who seek insurance most desire loans and insurance policies.        
    balloon payment A principal payment due in a large lump sum, usually at the end of the loan period.        
    capital In this context, long-term financing.        
    exchange rate The price of one currency in terms of another.        
    external finance Obtaining short- or long-term funding from outside sources (those external to the company).        
    facilitators In this context, businesses that help markets to function more efficiently.        
    financial derivatives Financial contracts, like forwards, futures, options, and swaps, the value of which derives from the price of some underlying asset such as a commodity, an interest rate, or a foreign currency.        
    financial system A densely interconnected network of financial intermediaries, facilitators, and markets that allocates capital, shares risks, and facilitates intertemporal trade.        
    foreign exchange Buying and selling of foreign currencies, for example, the British pound, the Japanese yen, and the European Union’s euro.        
    interest rate The price of borrowed money.        
    intermediaries Businesses that connect investors to entrepreneurs via various financial contracts, like checking accounts and insurance policies.        
    internal finance Financing that comes from the company itself, the plowing of profits back into the business.        
    life insurance A contract that promises to pay a sum of money to beneficiaries upon the death of an insured person.        
    liquidity The ease, speed, and cost of selling an asset.        
    markets Institutions where the quantity and price of goods are determined.        
    microlender A company or nonprofit entity that makes very small loans to impoverished, self-employed individuals.        
    minimum efficient scale The smallest a business can be and still remain efficient and/or profitable.        
    moral hazard Any postcontractual change in behavior that injures other parties to the contract.        
    negative amortization mortgage A mortgage with periodic payments lower than what would be required to pay the interest on the loan. Instead of declining over time, the principal owed increases as unpaid interest is added to it.        
    positive net present value projects A project likely to be profitable at a given interest rate after comparing the present values of both expenditures and revenues.        
    scarcity The finite availability of resources coupled with the infinite demand for them; the fact that goods are not available in sufficient quantity to satisfy everyone’s wants.        
    valuation models Theories of securities prices and their determinants.